European shares on Friday shrugged off worries over the coronavirus outbreak after the World Health Organisation designated it an emergency for China but not yet for the rest of the world.

The virus has killed 25 people and infected at least 800 in China, where health authorities fear the infection rate could accelerate as hundreds of millions of people travel over the week-long Lunar New Year holiday, which began on Friday.

The broad Euro STOXX 600 gained 1.1 per cent in early trading, with indexes in Frankfurt, Paris and London all advancing by similar amounts.

Shares in Bayer gained 2.5 per cent, driven by a report on a possible out-of-court settlement at a US jury trial over allegations that its weed-killer Roundup causes cancer. Wall Street futures pointed to slim gains.

The sunny start supported MSCI's world equity index, which tracks shares in 49 countries. The index gained 0.2 per cent, with resilience among markets in Asia also helping.

There, MSCI's broadest index of Asia-Pacific shares outside Japan rose 0.12 per cent amid slow trade for the Chinese holiday. Financial markets in mainland China, Taiwan and South Korea were closed on Friday. As investors made bets on riskier assets, safe havens such as the Japanese yen and gold stepped back.

The yen fell a touch to 109.57 yen against the dollar, off two-week highs of 109.26 touched on Thursday. Gold fell 0.3 per cent.

“Markets are waiting to see whether or not it has a material impact on growth, and that's hard to judge at the moment,” said Neil Wilson, chief analyst at Market.com.

Markets have reacted more calmly to the outbreak than was the case during the SARS epidemic in 2003, Wilson said, possibly because of greater information about its spread.

Still, underscoring the grave economic risks posed by any deepening of the crisis, the National Australia Bank estimated China's GDP growth for the first quarter could be hit by around 1 percentage point by the outbreak of the virus.

The Lunar New Year is a time of heavy consumption on travel, gifts and entertainment.

“The impact on Chinese growth could be significant given the outbreak coincides with the Chinese New Year,” said Tapas Strickland, NAB's director of economics in Sydney.

PMI IN FOCUS

Elsewhere, investors were paying attention to some of the first indicators of how the global economy has performed this year.

The UK flash purchasing managers' index (PMI) data, due out at 0930 GMT, may lend clues as to whether the Bank of England will cut interest rates next week.

Weak PMI data would likely show that a gloomy mood in the British economy persisted even after the Conservative party won a resounding majority in the December election.

Euro zone PMI data, also due at 0900 GMT, are expected to show an improvement that may provide some relief to the euro .

The single currency traded at $1.1049 versus the dollar, after falling overnight to a seven-week low of $1.1036.

The European Central Bank had on Thursday left its policy rates unchanged, though President Christine Lagarde struck a slightly dovish tone than some had expected.

Against a basket of six major currencies, the dollar was flat, trading off two-week lows hit on Thursday.

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